July 2014 The Cornish Account

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Slides from The Cornish Account event held on 2nd July 2014 at Heartlands, Pool. To view video content please copy and paste the below links into your browser: Video clip 1 https://www.youtube.com/watch?v=fiV0XNwTONw Video clip 2 https://www.youtube.com/watch?v=5nOvGR6KtXc Video clip 3 https://www.youtube.com/watch?v=ZsOQHhrOR9Q Video clip 4 https://www.youtube.com/watch?v=7VV0MIAP7s4 Video clip 5 https://www.youtube.com/watch?v=Fl-qChgBVMk Video clip 6 https://www.youtube.com/watch?v=Xc3mnnAHYBI Video clip 7 https://www.youtube.com/watch?v=07UGwI2N2BY Video clip 8 https://www.youtube.com/watch?v=GpwkeFnnsgY Video clip 9 https://www.youtube.com/watch?v=x-guc9b86tE Video clip 10 https://www.youtube.com/watch?v=qV5CXUhX-RI Video clip 11 https://www.youtube.com/watch?v=cTuYHtU8Jg4 Video clip 12 https://www.youtube.com/watch?v=GRzUEV4Fu8Y Video clip 13 https://www.youtube.com/watch?v=3GRr5P_O-lI

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<ul><li> 1. The Cornish Account Back in the Black? </li></ul> <p> 2. www.francisclark.co.uk The Cornish Account Back in the Black? Welcome Introduction 3. The Cornish Account Presentation at Francis Clark 2 July 2014 Stephen Collins Agent Agency for South West England 4. GDP and sectoral output South West Agency 5. OUTPUT AND EMPLOYMENT South West Agency 6. Contributions to the change in whole-economy employment since 2008 Q2 Source: Labour Force Survey. South West Agency 7. Self-employment share Source: Labour Force Survey South West Agency 8. Regional unemployment rates Source: Labour Force Survey. South West Agency 9. Survey indicators of capacity utilisation Sources: Bank of England, BCC, CBI, CBI/PwC, ONS and Bank calculations. South West Agency 10. Productivity growth Sources: ONS and Bank calculations. South West Agency 11. DEMAND South West Agency 12. Contributions to average quarterly GDP growth South West Agency 13. Household saving ratio South West Agency 14. Survey measures of household expectations Source: Research carried out by GfK NOP on behalf of the European Commission. South West Agency 15. Business investment and surveys of investment intentions Sources: Bank of England, BCC, CBI, CBI/PwC, ONS and Bank calculations.. South West Agency 16. Composition of the fiscal consolidation Source: Institute for Fiscal Studies. South West Agency 17. The UK current account South West Agency 18. UK goods and services exports South West Agency 19. UK imports and import-weighted demand Sources: ONS and Bank calculations. South West Agency 20. Sterling exchange rates South West Agency 21. Advanced economies continued to recover Contributions to growth in real world GDP, actual and forecast Sources: IMF World Economic Outlook (WEO) and Bank calculations. South West Agency 22. GDP projection based on market interest rate expectations and 375 billion purchased assets South West Agency 23. INFLATION South West Agency 24. Bank staff projection for near-term CPI inflation South West Agency 25. Contributions to CPI inflation South West Agency 26. Private sector nominal earnings and output per worker Sources: ONS and Bank calculations. South West Agency 27. Estimate of consumer-facing companies margins relative to its average since 2000 Sources: ONS and Bank calculations South West Agency 28. Companies expected changes in own prices over the next year Sources: CBI (all rights reserved) and ONS. South West Agency 29. CPI inflation projection based on market interest rate expectations and 375 billion purchased assets CPI inflation projection in February based on market interest rate expectations and 375 billion purchased assets South West Agency 30. CREDIT CONDITIONS South West Agency 31. Loans to individuals South West Agency 32. Projections and outturns for net lending to households and PNFCs South West Agency 33. At short horizons, implied volatility was historically low across asset classes Differences from averages since 2003, in standard deviations, of three-month option-implied volatilities Sources: Barclays Live, Bloomberg, Chicago Mercantile Exchange, NYSE Liffe and Bank calculations. South West Agency 34. House price inflation has risen in the United Kingdom Annual Halifax and Nationwide regional house price inflation Sources: Halifax, Nationwide and Bank calculations. South West Agency 35. House price inflation has increased in all areas of the United Kingdom during the past year Annual house price inflation Sources: Halifax, Nationwide and Bank calculations. South West Agency 36. Mortgage rates remained at exceptionally low levels Average UK mortgage rates on new lending Source: Bank of England. South West Agency 37. The share of new mortgages with LTI multiples above 4.5 has risen to a new peak New mortgages advanced for house purchase by LTI Sources: Council of Mortgage Lenders, FCA Product Sales Data (PSD) and Bank calculations. South West Agency 38. Indicators of housing affordability Sources: Bank of England, Halifax, Nationwide, ONS and Bank calculations. South West Agency 39. Headwinds Financial sector continues to heal Public and private balance sheets continue to be repaired Exporters face a 10% appreciation in the value of sterling over the past year Growth in the world economy, although improving, remains muted EA risks more balanced but downside risks o/a rapid growth in Chinese shadow banking Risk of reassessment of risks in financial markets implied volatilities are low South West Agency 40. POLICY South West Agency 41. Decision-making bodies, since April 2013 South West Agency 42. Bank Rate and forward market interest rates Sources: Bank of England and Bloomberg. South West Agency 43. Medium term monetary policy Meet inflation target, while using up spare capacity, particularly in the labour market Bank Rate increases are expected to be gradual and limited, so Bank Rate may need to stay low for some time Asset purchase sales (ie, reversal of QE) will be deferred till Bank Rate is at a level from which it could be cut materially Close coordination with the FPC South West Agency 44. Slack in the economy Companies operating at about normal levels of capacity, but significant slack in the labour market Best collective judgement: =1-1.5% of GDP Visible in unemployment rate above equilibrium level of part-time working among people unable to find full time work hidden slack in high level of self-employment? Expectation: only absorbed by the end of the forecast period, assuming output growth moderates and productivity growth resumes South West Agency 45. Policy measures announced by the Financial Policy Committee, 26 June 2014 First, we are introducing a new affordability test: mortgage lenders should assess whether borrowers could still afford their mortgage if Bank Rate were to be 3 percentage points higher than at the origination of the loan. Second, we are introducing a cap: no more than 15% of any lenders total number of new residential mortgages should be at or greater than 4.5 times the borrowers income. South West Agency 46. The Cornish Account Back in the Black? 47. www.francisclark.co.uk The Cornish Account Back in the Black? What we have seen Cornish economy perhaps slower to feel the cold in certain key areas Lack of large employers and higher than average self-employment But heavy reliance on Public sector for higher paid jobs 48. www.francisclark.co.uk The Cornish Account Back in the Black? What we have seen Construction hit hard due to finance availability and market conditions Cornish house prices peaked at 208,000 April 2008 but fell to a low of 175,000 May 2009 Business start-ups exceed failures 2004-2008, however 2008-2011 more failures than start-ups 49. www.francisclark.co.uk The Cornish Account Back in the Black? What is the most significant factor restricting your business? 1) Economy/Market Demand (40%) 2) Recruitment/Skills (21%) 3) Availability of Finance (17%) 50. www.francisclark.co.uk The Cornish Account Back in the Black? Recruitment/Skills 51. www.francisclark.co.uk Video 1 52. www.francisclark.co.uk Video 2 53. www.francisclark.co.uk Video 3 54. www.francisclark.co.uk Video 4 55. www.francisclark.co.uk Our survey - Employment/Wages Do you expect to increase you employee numbers in the next 12 months? 50% expect static numbers, encouragingly however, more expect growth (45%) than decline (only 5%) Investing/training for current staff 56. www.francisclark.co.uk Our survey - Employment/Wages What are your expectations for salary inflation in 2014? Static - 36% Up to 2% rise - 35% 2-4% rise - 28% Over 4% rise - 1% Pay cuts - 0% Cornwall continues to be well below National average, but who sets the wages? Pensions/Auto-enrolment All additional costs that need to be recovered No indication of wages inflation in the near future to close the gap. Impact on ability to get on the housing ladder? 57. www.francisclark.co.uk The Cornish Account Back in the Black? Availability/Sources of Finance 58. www.francisclark.co.uk Video 5 59. www.francisclark.co.uk Video 6 60. www.francisclark.co.uk Video 7 61. www.francisclark.co.uk Our survey - Investment Will you be looking to raise additional borrowing or funding in the next 12 months? 52%Yes 48% No 62. www.francisclark.co.uk Our survey - Investment 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Retained Profits Bank loan/Overdraft Grant /Public funding Crowdfunding Other Which source of borrowing do you expect to seek to provide additional funding? 63. www.francisclark.co.uk Our survey - Investment What will additional funding be for? 34% - Equipment (Tax driven?) 21% - Working capital Less apparent appetite for 8% - R&amp;D 3% - Business acquisition 64. www.francisclark.co.uk Economic Threats Interest Rates - The only way is up! 65. www.francisclark.co.uk Video 8 66. www.francisclark.co.uk Economic Threats Impact on National/Cornish Economy Households Business Politics? General Election 2015 Potential Opportunities Will savings rates follow interest rates? Retired and shoulder months 67. www.francisclark.co.uk Video 9 68. www.francisclark.co.uk Economic Threats Interest Rates - A blunt tool? One size does not fit all! 69. www.francisclark.co.uk Economic Threats What do you think is the most serious economic issue for Cornwall? Same old story, nothing new here! 70. www.francisclark.co.uk Video 10 71. www.francisclark.co.uk Economic Threats 1. Transportation links/costs Road/Rail/Air Local Public transport Isles of Scilly 72. www.francisclark.co.uk Video 11 73. www.francisclark.co.uk Economic Threats 2. Housing (affordable) Differential between house prices and wages Impact of Second Homes? Housing Boom? 74. www.francisclark.co.uk Opportunities Where is the greatest opportunity for Cornwall in the next 10 years? 75. www.francisclark.co.uk Video 12 76. www.francisclark.co.uk Opportunities 1) Energy and Renewables 2) R&amp;D sector 3) IT &amp; Related industries 4) Marine 5) Agriculture 6) Tourism New/Sexy! Jobs? Old/Established and forgotten at our peril 77. www.francisclark.co.uk Video 13 78. www.francisclark.co.uk Opportunities Brand Cornwall - Quality Third tranche of EU funding to 2020 Cornwall and Isles of Scilly LEP Need to build on Objective One and Convergence funding Where administered from? 79. www.francisclark.co.uk The Cornish Account Back in the Black? Is your business Back in the Black? Overall positive signs at individual business level 51% - Back in the black 25% - never went into recession 17% - Still in red but expectations of improvement 6% - Still in recession 80. www.francisclark.co.uk The Cornish Account Back in the Black? Do you think Cornwall is Back in the Black? Yes 33% No 67% Inconsistency with individual business responses? Everyone above average? Glass half empty? 81. www.francisclark.co.uk The Cornish Account Back in the Black? Conclusion 82. www.francisclark.co.uk The Cornish Account Back in the Black? With thanks to all who took part in the round table discussion and our survey. Kim Conchie Cornwall Chamber of Commerce Colin Stratton St Austell Brewery Jeremy Miller Miller and Son SW LLP Andrew Brewer FG Brewer &amp; Sons Limited Philip Strong Reflex Marine Limited Clare Mock Hardy Carpets Limited David Brian County Confectionery Chris Hugo Watergate Bay Hotel Tim Light Cornwall Ferries Limited 83. www.francisclark.co.uk (c) copyright Francis Clark LLP, 2014 You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by Francis Clark LLP in any format whatsoever unless you have obtained prior written consent from Francis Clark LLP to do so and entered into a licence. To the maximum extent permitted by applicable law Francis Clark LLP excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by Francis Clark LLP. These materials and /or any services provided by Francis Clark LLP are designed solely for the benefit of delegates of Francis Clark LLP. The content of these materials and / or any services provided by Francis Clark LLP does not constitute advice and whilst Francis Clark LLP endeavours to ensure that the materials and / or any services provided by Francis Clark LLP are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by Francis Clark LLP; nor do we commit to ensuring that these materials and / or any services provided by Francis Clark LLP are up-to-date or error or omission-free. Where indicated, these materials are subject to Crown copyright protection. 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